Elon Musk Is On Close Leash With SEC – Here's Why Investors Should Be Thankful

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  • The SEC has asked a federal court to sentence Elon Musk on the grounds of a tweet in which he incorrectly commented on the company's 2019 production.
  • Musk corrected this tweet, but his settlement with the SEC after his previous faux pas on Twitter required him to remove his tweets with the company's lawyers.
  • Tesla shares opened with a 2.2% drop on the morning of February 26th.
  • Elon Musk's Twitter account once again plunged into the spotlight with the Securities and Exchange Commission, sending the Tesla title to trading after office hours on Feb. 25. A news broke after the market shutdown that the SEC had asked a federal court to hold Musk in contempt. tweets about Tesla's forecast for production this year.

    The SEC's record indicated that Musk – who was already giving up his role as chairman of Tesla as part of a settlement of incorrect tweets – had not cleared the tweet with the company's lawyers, as stated in their agreement past.

    This caused Tesla's stock to plummet after office hours, finally opening at $ 292.22 on the morning of February 26, a 2.2% drop from the previous day's close of $ 298.77. The story has raised interesting questions about the role of leaders and the nature of public and non-public information in the social media era.

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    Elon Musk's Twitter account continues to cause him trouble

    The last tweet that put Musk in hot water was published on February 19th. He tweeted that Tesla would produce 500,000 cars in 2019, and then issue a Twitter fix about three and a half hours later, meaning that Tesla would reach an annualized production rate of 500,000 cars by the end of the year. It was already public information – it was included in the 4th quarter report published Jan. 30 – but Musk's mistake in his previous tweet triggered red flags.

    This means that the annualized production rate at the end of 2019 should be around 500 000, or 10 000 cars / week. Deliveries for the year are still estimated at approximately $ 400,000.

    – Elon Musk (@elonmusk) February 20, 2019

    One may wonder how innocuous this mistake may be, but Musk is already on a tight leash. Last year, he had tweeted that he was taking the company at $ 420 per share and that he had already secured funds. This turned out to be wrong. Musk eventually came to a settlement with the SEC in which Musk resigned from his role as president. The company and himself have been fined $ 20 million. Musk agreed not to return to the position of president for three years.

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    SEC rules exist to protect investors

    Some people might look into the current flap and wonder why a few tweets are worth so much acrimony. But it's important to remember that the flow of information from publicly traded companies, their managers, and their leaders is regulated for a reason.

    In the end, it's about protecting the average investor. The current environment forces public procurement firms to disseminate information in a structured manner, giving each investor equal access to that information. Quarterly earnings reports, for example, are filed with the SEC and then released to everyone at the same time, so that no investor can exchange this information before the general public is made aware of it – or, as Martha Stewart can testify, not legally.

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    This helps make markets a relatively safe place for the average investor. When equal access to information about these companies is equal, it means that even 401 (k) investors who do not actively follow the day-to-day markets can still be reasonably assured that they will get a reaction. reasonable when they invest. However, if the leaders and leaders of these companies had the leisure to disclose strategic information to manipulate the markets – or even disseminate erroneous information without serious consequences – this would ultimately deflect the average investor's equilibrium. in a manifestly unfair manner.

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    Why Elon Musk tweets are important

    Although Musc's tweet may seem like a relatively innocuous slip, it's also the kind of slippage that can have much bigger ramifications. This is particularly important in the context of its past transgressions and its settlement with the SEC.

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    And even if you think the SEC is overreacting in this situation – and you would not be alone – it's important to remember that controlling the flow of public information is a crucial part of their mission and plays a role. important role in the creation of public, good, public markets. It is important for stock markets to maintain the type of ecosystem that, while chaotic and risky, still allows individual investors to feel as if they are not shaken well when contributing to their 401 (k).

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